84.23

OPINION NO. 84-23

An opinion has been requested concerning whether the Minority Business Enterprise Administrator (MBE Administrator) for the Department of General Services (DGS) may serve on the Board of Directors of a private non-profit minority business funding organization.

The MBE Administrator for DGS (the Requestor) is on the staff of the Deputy Secretary, but is assigned to the agency's Purchasing Bureau. The main purpose of her position is described as "coordinating all preference purchasing and specialized purchases of commodities including but not limited to, small business, handicapped organizations, State use, Blind Industries, etc. for the purpose of increasing purchases from such entities." She is described as being accountable to be sure that DGS has a strong minority vendor base in its commodity purchasing, and that these firms can submit bids and be successful. She is thus responsible to maintain and increase the certified minority business vendors list, and to counsel possible minority bidders as to how the State procurement system works.

The MBE program functions pursuant to regulations issued by the Board of Public Works at COMAR 21.11.03. These regulations establish procedures for State buyers to follow in assuring that the State uses minority businesses. They include provision for certification through the Office of Minority Affairs that an entity is minority-owned and controlled. The Requestor participates as an advisor to the Minority Business Certification Council, which makes the certification decisions, but she does not have a vote. The official representative of DGS on this Council is the Department's MBE Liaison, who is an official in the Office of the Secretary's Equal Opportunity Division. The regulations also establish target percentages for minority contracts (there is no set-aside program in Maryland so these targets are goals only), and solicitation and contract award procedures for agency buyers to follow to ensure minority participation. Compliance with these procedures by buyers is a matter for review by the Supervising Buyer.

The Requestor indicates that she does not interact with buyers as to implementation of procedures issued by the Purchasing Bureau carrying out the regulations, though she did assist in developing the procedures. One of the new requirements established by these procedures is that solicitations will in the future be sent to all certified minority businesses. Currently the solicitations are sent to a selected group of businesses with a copy to the MBE Administrator. Her input into the solicitation process has been to send the solicitation directly to additional minority businesses if, in her view, the coverage was too limited. She states, however, that she would not have contacted the buyers, or otherwise participated in pre-proposal conferences or development of bidder lists as to a particular procurement. According to the Requestor, the Purchasing Bureau's commodity purchases are all by direct procurement competitive sealed bids--there are no negotiated awards and no subcontracts. All bids are evaluated based on the usual criteria designed to award to the lowest responsive, responsible bidder. Application of these criteria is done by the buyers and the MBE Administrator apparently does not have a role in this determination; her job is to work with the vendors to assist them in preparing their bid documents to successfully compete in this process.

The Requestor has been selected to be a member of the Board of Directors of the Development Credit Fund (DCF or the Fund), a private non-profit financial organization organized to provide low cost loans to businesses owned by socially and economically disadvantaged persons in Maryland. The Fund currently has a revolving loan pool of $7.5 million provided through several participating banks. It is directing its efforts at expansion assistance for established firms primarily in the construction and service industries, and its primary target area is currently Baltimore City and the Metropolitan area. In contrast to this we note that the Purchasing Bureau's interaction is with commodity suppliers, most of which are apparently not local, either to Baltimore or the State of Maryland.

The DCF Board of Directors consists of bankers and minority development businessmen. No public officials other than the Requestor are on the Board. The Directors are not paid. The Board's role is to make general policy and management decisions, and to approve any loans of over $100,000, usually based upon staff recommendations. Loans may be for a minimum of $5000 and up to a maximum of $500,000, and are for meeting equipment, machinery, and working capital needs. All loans are guaranteed by the Maryland Small Business Industrial Development Financing Authority, a State entity within the Department of Economic and Community Development. The Fund has no contracts or other relationships with DGS.

Though the Requestor's position on DCF's Board of Directors is not compensated, it is our view that it involves the type of management and fiduciary duties that we have consistently treated as employment under §3-103(a) of the Public Ethics Law (Article 40A, §3-103(a), Annotated Code of Maryland, the Ethics Law). (Opinions No. 84-17, No. 83-24, No. 82-45 and No. 82-43, for example.1) Since DCF appears to have no interface with DGS, however, we do not believe that there are issues under the §3-103(a)(1)(i) prohibition against employment by officials or employees with entities that contract with or are regulated by their agencies. The question in our view is whether there are any issues raised under the more general prohibition of §3-103(a)(1)(ii) against any employment relationships that would impair the individual's impartiality or independence of judgment. In applying this provision, we have generally looked to the official's duties to determine whether they would have any relationship with or impact on the outside employer, or otherwise be related to outside activities so that the individual's performance of official duties would be impacted by outside loyalties. (Opinions No. 84-7, No. 83-39, No. 83-30 and No. 82-28.)

The situation here would seem to raise issues primarily from the fact that the Requestor may be dealing with the same population of entities in both her private and official roles. There could thus be an issue as to her possibly acting within her official capacity as to a particular firm, based on her involvement with that firm through her private affiliation with DCF. We note, however, that the DCF deals primarily with local construction and services firms, while the Purchasing Bureau's vendors tend to be commodity dealers who the Requestor indicates are not local. Also, she and her supervisors are all insistent that she does not impact on the agency's contract process, and the Department has informally indicated that it does not view this situation as presenting problems for its program. Under these circumstances, we believe that the relationship between the Requestor's agency and her MBE Administrator duties and the DCF is too remote to raise the kinds of inconsistent employment issues intended to be addressed by §3-103(a)(1)(ii), and advise her that her service on the DCF Board would not, as the situation currently stands, be a violation of §3-103(a) of the Ethics Law.

We have also considered whether there is any application to this situation of §3-104 of the Ethics Law. This section prohibits an official or employee from using the prestige of his office for his own economic gain or that of another. We have in the past applied this provision to prohibit a person from accepting a fee for the performance of services for another that flow directly and immediately from his State duties. However, there is no compensation here, and, moreover, we do not believe that the Requestor's service on the DCF Board flows so directly and immediately from her State position that this section should be applied based on the potential economic benefits to DCF, its investors, or its borrower/clients. We note in this regard that the Requestor has a degree in Business Administration and is a graduate student in Finance at the University of Baltimore. Prior to her employment with DGS, she has been affiliated with the Urban Economic Development Center, Coppin State College, and the Baltimore Council for Equal Business Opportunity, Inc. Thus, though it is true that the Requestor has a known status within the minority business community partly based on her position with DGS, she also has relevant non-government qualifications, and we cannot conclude that this situation results in use by a private entity of the prestige of the State of Maryland as contemplated by §3-104.

We therefore advise the Requestor that her service on the DCF's Board as it is described to us does not in itself violate the provisions of the Ethics Law. She should, of course, be aware, as her affiliation with DCF develops, of the continuing applicability of the provisions of the Law, particularly §§3-101 (non-participation), 3-104 (misuse of prestige), and 3-107 (misuse of confidential information).

Herbert J. Belgrad, Chairman
    Reverend John Wesley Holland
    Betty B. Nelson
   Barbara M. Steckel
   Thomas D. Washburne

Date: October 16, 1984

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1 Except as otherwise expressly cited to the Maryland Register, Opinion citations are to Commission Opinions published at COMAR Title 19A.